Those who argue that good economics means good politics, and that if the state is reasonably wealthy, the government would automatically translate into good governance, will find themselves at a loss in UP.
Few remember that unlike Bihar, where the bifurcation of the state left Jharkhand with the mineral wealth and Bihar with the salary burden of a non-performing lower bureaucracy, with UP it was the reverse.
When the state was divided between Uttar Pradesh and Uttaranchal (now Uttarakhand), UP's salary bill went down dramatically and its net fiscal position improved. Add to that that only a fifth of all industry was located in the hill areas, and planners saw a window of hope for economic resurgence.
But this was not the only reason for hope. Way back in May June 1998, when Kalyan Singh was chief minister, UP embarked on a ruthless drive to set its finances right.
It took a White Paper by the Kalyan Singh government and his first Budget to tell people that the government needed to shape up or ship out.
From being equal to the country average in 1950, the per capita income of UP had declined to 35 per cent less than the all-India average. Annual per capita growth had slowed down to less than 1 per cent in the 1990s, even as the rest of the country was surging ahead after the first spurt of liberalisation.
As a result of high deficit for over a decade, debt service had increased its claim on total state revenue from 13 per cent in 1985-86 to 32 per cent in 1997-98 and 37 per cent in 1998-99.
Instead of using current or revenue account surpluses to partially finance public investment, the government was borrowing from every available source to pay ongoing debts. Something needed to be done and the time was now.
Five men were responsible for some of the turnaround. Led by chief secretary Yogendra Narayan, the team comprised S C Tripathi (principal secretary, finance), H C Gupta and Paul Joseph (principal secretary cum commissioner of trade tax), Pankaj Aggarwal (IT secretary) and B M Joshi (economic advisor).
"In 1999-2000, Tripathi sought financial restructuring. He told us: do a diagnostic. We recommended some measures, he took them fully on board," said V J Ravishankar of the World Bank.
The report recommended fiduciary and administrative measures. The most urgent measure was to improve revenue collection. Narayan and Tripathi cajoled, browbeat and blackmailed the government into getting the bureaucracy to act.
As trade tax commissioner, it was Paul Joseph's job to force people to pay tax. There were two problems: the government was not collecting revenue; and there was collusion between officers and tax payers.
The administration whipped itself into action. Amazingly, revenue collections improved.
Image: Protestors burn an effigy of the UP chief minister in New Delhi. With no love lost between the Congress, SP, BJP and the BSP the battlelines are drawn in UP.
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Reports from UP
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